YEAR 2004-05 YEAR 2002-03 YEAR 2001-02 YEAR 2000-01


Memorandum to the Finance Minister


I. Introduction

1.1 The scope and context of the term: ‘consumer welfare’ has undergone a significant change since India embarked on the path of globalisation and liberalisation.

1.2 Given this, one would expect the existing institutions, legislations and most importantly outlook of our bureaucracy to respond to the new challenges thrown up by the changing scope and context of consumer welfare, as well as by the pace at which these two important facets have been changing.

1.3 In India although the three entities mentioned above have somehow responded partially (and at times even half-heartedly) to the challenges that have arisen due to the changing scope and context of consumer welfare, one finds that they have a poor record when it comes to keeping pace with these changes. They conveniently seem to forget that lack of pace on their part would ultimately lead to reduction in the quality and timeliness of their responses.


II. Regulatory Reforms

2.1 The above is adequately reflected in our economic reforms process. Even though one finds that some independent regulatory authorities have been created to regulate the telecom, capital markets, electricity, ports etc. the pace at which they are functioning or allowed to function raises questions about the commitments of such initiatives towards consumer welfare.

2.2 More so, one finds that consumers and the organisations representing their interest many a times seem to be ignorant about the existence of such institutions, especially at the State level. Given this we suggest that the oncoming Budget should allocate financial resources for all regulatory authorities at the national as well as the state level for ‘advocacy and outreach’.


III. Non-merit subsidies

3.1 There is adequate economic literature to prove that provision of non-merit subsidies leads to misallocation of scarce resource like capital leading to development distortions. The white paper on subsidies presented during 1997-98, for the first time drew the line between merit and non-merit subsidies. This was also an attempt to make the people realise the price they have to pay while making a transition towards a market driven economy.

3.2 But the bold articulations made in the white paper have not been followed by actions, except in the area of subsidies in petroleum products, which was undertaken after facing strong opposition.

3.3 Given this, the Finance Ministry should now initiate the process of dismantling and/or reducing some of the non-merit subsidies, starting with higher education, urban transportation etc. which do not affect the interests of the poor consumers. These funds can then be channeled into effective targeting of merit subsidies.

3.4 Structured and periodic consultations with consumer organisations can help create constituencies for furthering such reforms.


IV. Issues related to the WTO

4.1 Given the rapid developments taking place on the WTO platform that have a bearing on the nation, one finds that India will not be able to respond to issues without creation of an efficient information infrastructure that will be able to disseminate undistorted information in a timely manner to concerned players, viz. concerned ministries, representative organisations of industries, consumer organisations and development groups. Hence the ensuing budget should make some allocations in the budgets of the concerned ministries and other related institutions.

4.2 Importantly with the abolition of quantitative restrictions, there exists a possibility that the domestic consumer goods industry will press for initiating antidumping as well as safeguard actions against imports of cheaper consumer goods. In some cases they may be justified where as in some other they may not be. Therefore to protect the consumer interest along with industry interest in this regard, the Ministry of Finance along with the Ministry of Commerce should announce effective steps in the budget for 2000-01 that will reflect its resolve in balancing industry interest with consumer interest. One concrete step in this direction could be to issue guidelines to the Antidumping Authority to seek representation of consumer interest during the proceedings of an antidumping enquiry. The Finance Ministry could also think of creating a fund that would help consumer organisations participate in such cases.

4.3 Another issue that is growing rapidly in the world and will embed in the WTO requiring immediate attention is e-commerce. E-commerce transactions have a number of consumer protection dimensions associated with them. More so the consumer dispute resolution agencies under the Consumer Protection Act and the Monopolies & Restrictive Trade Practices Act will likely be flooded with complaints involving e-commerce transactions in the next few years, without much literature or case law. Given this, the Ministry of Finance should allocate resources that would be spent on educating concerned dispute resolution agencies on the finer issues concerned with jurisprudence in the area of e-commerce.

4.4 Issues pertaining to child labour are making their presence felt on the WTO platform. The recent happenings on linking international trade with labour standards at the Seattle Ministerial Meeting are clear evidence in this regard. The Finance Ministry could think of initiating a specific programme in its budget for the year 2000-01 that would channel funds being spent on non-merit subsidies towards addressing issues pertaining to child labour. For e.g. providing allowances to the families of children engaged in child labour, so that they can attend schools. This would not only help us achieve our domestic objective but would also help us answer concerns being raised by the international audience on platforms like the WTO and the ILO.


V. Competition Policy

5.1 We take this opportunity to congratulate the Finance Minister for initiating steps towards setting up of a “Committee on MRTP Act and Competition Law” during his budget speech for the year 1999-2000. This is a welcome step and we would welcome a totally new competition legislation, as any tinkering with the old MRTPA will not be able to resolve the systemic and inherent problems in the same.

5.2 CUTS has already sent its suggestions to this Committee on issues pertaining to formulation of a new competition law as well as on the corresponding machinery that would be required to operationalise it.

  • The Committee should document its understanding vis-à-vis the difference that exists between competition policy and competition law.
  • Given the growing interface between trade policy and competition policy, the Committee needs to spell out its position clearly on issues pertaining antidumping, issues pertaining to intellectual property right protection, etc.
  • The proposed Competition Authority should be an independent statutory body established under the Constitution without any political or budgetary control of the Government.
  • The Authority should have an independent budget that allows it to have regional offices, which would be responsible for initiating investigations as well as shoulder responsibility in the area of competition advocacy.
  • Consumer organisations well versed with competition and trade policy issues need to be consulted at regular intervals to understand the emerging concerns in this area.

    VI. Consumer Policy

    6.1 The eagerness shown by consumer organisations to have a National Consumer Policy by the Government has been complemented by a resolution adopted by the Central Consumer Protection Council few years ago. The goal envisaged is towards creating an empowered consumer to address diverse problems arising as a result of liberalisation and globalisation, with the National Consumer Policy Statement as an instrument. Both Sweden and Japan have a law on consumer policy.

    6.2 The National Consumer Policy statement will help guide various Government Departments in harmonisation of their work towards implementing measures relating to consumer rights (as mentioned in the United Nations Guidelines for Consumer Protection, 1985: basic needs, safety, choice, information, consumer education, redressal, representation, and healthy environment).

    6.3 More importantly, the National Consumer Policy Statement emphasizes on the right to basic needs. Satisfaction of these needs is of utmost importance for dignified living, particularly for the disadvantaged consumers living below the poverty line. In India, we still have an estimated 320mn consumers living below the poverty line.

    6.4 The Finance Minister while presenting the Budget for 2000-2001 to the Parliament can initiate action in this regard by adopting the National Consumer Policy statement in letter and spirit.


    YEAR 2004-05 YEAR 2002-03 YEAR 2001-02 YEAR 2000-01